Articles Tagged ‘C.J. McClanahan’

Value Based Pricing for Professional Services

Wednesday, November 11th, 2015

Way in the back of the room, a young man in a crisp blue suit, raised his hand.

“Do you know how we make money?” he asked.

I was in the middle of one of my favorite topics, teaching attorneys how to increase their productivity by more effectively managing their time.

The crowd got real quiet because he was addressing the pink elephant in the room.

I responded with – “Thanks for having the courage to ask the question everyone in the room wants answered. Why would anyone want to get more work done in less time when most are incentived to bill for as much time as possible?”

This is an extremely important question – with no easy answer. However, we’ll discuss how to make this happen.

The Current State

Today, the majority of legal and accounting firms (referred to as “professionals” for the remainder of this piece) follow the same business model.

Get a new client, provide them with a billable rate, bill them as many hours as possible, and if they complain about your invoice, write down a portion of the charges.

Truth be told, no one likes this model.

Clients hate the idea of engaging with a $350 an hour professional who indicates that the fee will be “however long it takes.” In addition, these same clients are well aware that most professional’s compensation is tied directly to the amount of hours they bill.

NOTE: I’ve worked with hundreds of professionals over the years. To my knowledge, not one of them has intentionally delivered work in an inefficient manner just to increase their fees. However, this doesn’t mean that the current model is the most effective method for delivering these services.

Many professional services firms are frustrated by the fact that there are only two ways to grow revenue – Increase the amount of hours worked or the billable rate.

In 2015, the problem for these firms is made worse by 2 unrelated factors.

First, younger professionals (millennials) don’t typically have the same career goals as previous generations. They are very interested in work/life balance and are more likely to walk away from the big payday if it means a 70 hour work week.

Second, technology is commoditizing most professional service industries. By that I mean, it’s easier than ever to understand who delivers the exact service needed, compare prices and pit providers against one another in a bidding war. This competition depresses the average hourly rate and will only get worse as low cost providers (typically in foreign countries) get better at delivering their services in the US.

Shifting Paradigm

Maybe, it’s time to consider a different approach?

Instead of putting up with the status quo, I’d challenge you to consider the following question – What if I could charge for the value I create, rather than the number of hours I work?

I know what you’re thinking – Thanks for pointing out the obvious. What are you going to talk about next – how to eat whatever I want and lose weight?

In understand that charging for value instead of hours has been an elusive pipe dream for years.

However, the demographic/technological changes are forcing the industry to move beyond dreaming about value based pricing and work towards making it happen.

It’s Not Going to Be Easy

Let me state the obvious – this is not going to be easy. In fact, it’s going to be one of the biggest challenges your firm will face.

I’ve heard many of the standard objections…

It’s impossible to know how many hours a project will take. What if I guess low and end up losing a ton?
My clients haven’t even mentioned this idea. Why would I want to risk introducing a controversial new concept to a stable relationship?
Accountants/attorneys have been keeping track of their time in 6 minute increments for thousands of years – getting them to change behavior would be impossible.
What if my competition points out all that could go wrong with this approach and my clients agrees.
If I were running a large firm, I would look at these legitimate doubts and be very tempted to declare – “This challenge is simply too big.”

Your peers within the firm will push back the hardest. Next, many of your clients will be skeptical assuming this is simply another attempt to line your pockets.

As I mentioned, it’s not going to be easy.

Walk Before You Run

Because the challenge is so significant, I recommend you take a very careful and slow approach that follows these key fundamentals.

Customer First – If your motivation behind making this change is simply to increase the bottom line, you‘ll struggle. The goal of this (and just about any) effort should be to bring more value to the customer. This focus will ensure you have the right conversations both internally and externally.
Understand the Data – Before you do anything, take the time to carefully detail the services that are a good fit for value based pricing (e.g. – simple contract reviews) and those that aren’t (e.g. – complex M & A transaction). In addition, put together a list of the clients who would be a good or bad fit for the initial conversations about this new approach. Keep in mind some clients (those that use you sporadically for small projects) may never be a candidate for this change.
Be the Leader – In the professional services industry, you’re either a commoditized vendor sitting and waiting for the next “project” or a trusted advisor. Assuming the latter role will allow you to have meaningful conversations about a change in your approach. You can then advise the client that considering value based pricing could help them effectively budget for legal services and efficiently utilize resources.

Start Small – Pick a small project and see how it goes.
Reflect and Adjust – Once the project is completed analyze the effort to understand the profit margin, the effectiveness of your team and most importantly – the satisfaction of the client.

I am fully aware that there are thousands of details left to be addressed before you do anything.

Changing the way you value and bill for your services is one of the biggest challenges you’ll face as a firm. It

To paraphrase a former president – I feel your pain.

Before you push this conversation to next year’s partner meeting, remember that it’s not 1995.

Today, the marketplace evolves at a pace we couldn’t have even imagined 20 years ago. The organizations that grow will be those that embrace innovation in its many different forms.

Get out in front and lead.

Help your clients perceive your firm as a valuable provider of services that help you to grow.

C.J. McClanahan
317-576-8492
cj@cjmcclanahan.com

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Do You Really Need an Apple Watch?

Friday, March 20th, 2015

On March 9th, Apple announced the newest addition to its product line, the Apple Watch. As expected, the media lost their minds, fawning over every single feature and benefit. Analysts predict the company will sell between 30 and 40 million units in the first 12 months.

I bet they are right. I am certain that a line of Apple fanatics will wrap around local Apple stores, camping out for days to be the first to purchase this new product.

In fact, I’d bet you’re considering buying an Apple watch. It’s OK, don’t be embarrassed, admit it.
But, before you go and plop down a minimum of $349, as a public service, I feel obligated to offer a few observations:

You should be a little offended. In addition to telling the time, the Apple Watch does a whole bunch of other stuff (Instant messaging, listen to music, check the weather, etc.) that is also offered via your iPhone. Apple is convinced that you have become so lazy, that reaching into your pocket is now considered cumbersome. What’s next, a chip implanted in your brain that updates Facebook every time you see a hysterical bumper sticker?

It’s not a Rolex. Personally, I don’t have a ton of really expensive clothes/accessories. However, I completely understand it when an individual wants to look their best and buys a nice watch, jewelry or a tailored suit. If you are this type of person, the Apple Watch is not for you. No matter what style you get (even the $17k gold version), the watch is square, bulky and ugly. It is not a fashion accessory.

Your productivity will go down. This final point will certainly generate debate, but as with most arguments, you will eventually agree with me. The Apple Watch will not help you get more done in less time for two reasons. First, the watch is designed to stay paired with your iPhone and, I can’t believe I find the need to point this out, if you have your iPhone with you why wouldn’t you just use it? Second, research from a lot of really smart people has concluded that constant interruptions significantly reduces your productivity.

Here’s my advice. If you are so in love with everything Apple, then just go and get an Apple or Steve Jobs tattoo on your wrist. It shouldn’t cost more than $100, and you can take it swimming. Most importantly, I promise everyone will “get” your devotion to the brand the instant they see it.

C.J. McClanahan
Reachmore Strategies
317-576-8492
cjm@goreachmore.com

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Everything Can’t Be Important

Sunday, December 15th, 2013

I just checked and there are now officially 167 great new ideas/technologies that I should be utilizing “right now” in my business to help it grow and become more profitable.
If I wanted to add another dozen, I could just pick up the latest copy of Inc., Entrepreneur or Fast Company They are filled with “How to” lists that could keep you busy “improving” for years.

The access to great ideas is unlimited and is only going to improve.

That’s the good news.

Unfinished Projects

Unfortunately, there’s another side to this coin. It’s called “great idea overload” and it leads to an office/home full of half-finished projects.

A clear symptom of this disease is a whole bunch of $9.95 hits to your credit card for services (aka – great ideas) that you can no longer remember purchasing.

You probably tell yourself that you are just one “app” away from breaking through to the next level.

You may be that close, but it has nothing to do with one great idea.

Marathon

You are in the middle of a marathon, not a sprint. Your success isn’t built upon half finished “get rich quick” ideas – it’s built upon a powerful vision that guides your everyday tactics.

The clearer the vision, the easier it is to prioritize and say “no” to all of the really great opportunities that will hit your email, Twitter® feed or Facebook® wall throughout the day.

Everything can’t be important.

What do you need to say no to today?

C.J. McClanahan
Reachmore Strategies
317-576-8492
cjm@goreachmore.com

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You Have Plenty of Time

Thursday, August 29th, 2013

I live by a handful of fundamental beliefs – you probably think of them as clichés.

One of those is that there is no such thing as a free lunch. In other words, if you want to be successful, you need to put in the work. This flies in the face of virtually every marketing message you hear today that promises instant riches, perfect relationships and rock hard abs with little effort. However, just this once, I am going to go against one of my fundamental beliefs.

You are seconds away from hearing a simple piece of advice that is guaranteed to improve your productivity by at least 25% within 30 days – guaranteed.

Ready? Here goes.

Eliminate the following excuse from your vocabulary – “I didn’t have enough time.” This one simple adjustment will change everything and here’s why.

You always have enough time.

Saying, “I don’t have enough time” is never true – never. If you don’t do something it’s because you chose to do something else. There are no exceptions to this rule – none. This simple recognition will improve your productivity because you will no longer commit to activities that you know you won’t complete. You will begin to understand one of my favorite quotes from Patrick Lencioni – “If everything is important then nothing is important.”

This shift in your perspective will help you recognize the difference between a “should” do and a “must” do. Productivity is a direct result of spending your time on the most important activities.

That’s it. Quit making excuses and get clear about what’s important.

C.J. McClanahan
Reachmore Strategies
317-576-8492
cjm@goreachmore.com

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